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Internal Revenue Service Oversight

IRS Commissioner John Koskinen testifies; details on the 2015 budget.

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  CSPAN    Internal Revenue Service Oversight    IRS Commissioner John Koskinen  
   testifies; details on the 2015 budget.  

    March 1, 2014
    12:22 - 2:21pm EST  

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dementia odds are you are old which means you have less of an income which supports those statistics. >> thank you dr. rogen. >> i see in education the older population is much less educat educated. they have education less than high school. education is highly reralated t education status. >> my mistake was thinking that this was true at every level, at every age. i wondered why there would be that difference and there is not. thank you for clearing that up. >> anytime. >> you have a future at nih or the rand corporation i don't know which.
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did you have anything else? >> only this mr. chairman. thank you very much to these witnesses and to the earlier panel. grateful for you allowing for us to have this hearing today. i appreciate the folks across the country who are observing this hearing. we understand how important this issue is and we want to continue our efforts who want to find the cure and provide hope to the american people. on a more pedestrian matter senator collins ask that she have a statement made part of our record and without objection it is ordered. i would join with my friend and colleague senator rand thanking you all. thank you for your great leadership and all of you who
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are here today. i know you came a great distance. i want you to know. this is an issue that we are serious about. and we've got to find the funding for it. we have to make sure we have a steady stream of funding. this up and down can't continue. i was happy that i was able to join years ago the funding for nih but since then it has gone down hill. we have it up in that plateau and it didn't work out that way. so we need your presence here but we need your presence back in your home states. talking to your members of congress on both sides of the i'll to let them know the importance of this.
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i hope that our funding level this year will reflect the increases last year. we'll do everything in our power to make that happen. again, i thank you for your advocacy and i encourage you to keep strong in that. this place, this senate, this congress, however much you read, responds to what people want us to do. and so, if you want this to happen. if you want us to make sure we get this good funding stream you have to keep the pressure up. you will see the way clear for
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great strides in getting to the point where we can prevent, treat and cure alzheimer's. that is our goal. and we are going to get there. [ applause ] . >> house keeping, the record will remain open until march 5th for other statements and comments from other senators. safe travels home. >> he tweeted about his experience on capitol hill, saying, not sure what only to some editors -- why only two senators were at the hearing. seems to be a low priority. at thethe senators not hearing was subcommittee chairman. he chairs the house labor pension committee. he will be our guest this week
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on newsmakers. about the issues he talks is the debate over raising minimum wage. >> what do we do to get more support within your party and get this bill to the floor? it seems like a bit of a delay getting it to the floor. maybe it is not quite happening at this point. why the't understand republicans are in lockstep against increasing the minimum wage. all the studies show it will increase the gross domestic -- gross- grocery national product. to spendworkers tend every dollar they get and they spend it locally. they are not going to france or england or japan on vacations. they spend it locally at the local merchants. multiplayer --
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great multiplier effect. >> is there anything you and your supporters can do to draw >> we have party? already adjusted it. is at threease in months. we doubled that. in an extension for capital equipment for certain small businesses, which expired last year. we put that in to help small businesses that have to buy new equipment. they don't have to write it off for long periods of time. fore are good benefit business. we have a break coming up in the third week in march.
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>> why the delay? >> we have the veterans bill and next week we have the child care development block grant. that will take some time. the leader wanted to come back on the unemployment extension. that kind of takes us up to the break. watch more with senator harkin. we will have the entire interview tomorrow at 10 a.m. and 6 p.m. eastern. now turning to news from ukraine. russianthis morning the parliament unanimously approved a request from vladimir putin to send troops to the ukraine. president putin made the request in order to protect ethnic russians and the personnel of russian military bases in the crimea -- in the crimea. the un security council will be meeting later today to talk about the situation there.
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senator john mccain of arizona says russian senate backs putin, requests to centrists to ukraine straight out of soviet playbook. don't want cold war back but putin seems to. jeff fortenberry says -- >> is the say hep tea -- is this a technique of campaign fund-raising -- >> i don't think that is any of your business. [laughter] think the glamour of reagan had less to do with his hollywood roots, per se. it was in the glamour of hollywood, exactly.
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it did have something to do with the skills and the grace he acquired as an actor. that was always his mark. feeling those questions, you -- fielding those questions, he made it look glamorous. people who are likely to support him politically can see in him the ideal candidate, the ideal representation of their views. they weren't waiting for him to fail. daysially in those early this -- it is a word that comes from the 16th century book how to bertier about a successful politician of the day.
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and using glamour sunday night at eight on c-span's q and a. >> next, and oversight hearing with john cough can. house committee that looked at proposed rules for nonprofit groups seeking tax-exempt status. >> the hearing will come to order. this is the first hearing of the
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year for our subcommittee. welcome to all the subcommittee members. glad to have you back. a warm welcome to our subcommittee's newest member. he is not here yet. he will be down at the end. we look forward to having him work with us. today the subcommittee will hear from two panels. we will hear about the activities and operations of the internal revenue service. our witness is irs commissioner. welcome to you, sir. we appreciate your return to the service and thank you for taking on this task. we also have russell george and nina olsen. we appreciate the careful and constant oversight of the irs. we have not heard in some time from ms. olsen, so we are especially eager to hear from her. as a matter of house keeping, i will be following the five minute rules for that members. i do not plan on cutting anyone
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off in the middle of their sentence, but if everyone could keep their questions and comments for when we get to that part of the program, that will give us a chance to hear from everyone and have maybe more than one round of questions. i am going to recognize the members in order of seniority. those that were here and the latecomers, we will recognize them based on their arrival. we will go back and forth between the parties. i think most of you know that the 2014 appropriation cycle tested our endurance. it was only after the fiscal
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year started and after we had a government shutdown that the budget committee came to an agreement on the discretionary spending. once we have that agreement enacted, we will do our sleeves and we went to work quickly and got a bipartisan on this appropriation bill. it is and thanks in no small part to our distinguished chairman, mr. rogers, who is with us today. we hope this year will go more smoothly. we have got an agreement on the total discretionary spending that is in place. by that, i mean the way we are supposed to work and we will mark up our bills and subject them to amendments on the full committee and on the house floor. the administration hasn't submitted their budget of 2015 yet. we will have that soon. we have invited the commissioner
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to come back, probably in april. today this is an oversight hearing. that really gets into how to spend the money that has been appropriated. how much will come a little bit later. i suggest that the two are very interrelated. how you spend the money that you have impacts how much money you will receive in the future. i think that we all know that you have come to the irs and what would be described as a difficult time. some would say you have inherited a pretty big mess. we have a situation that is one of the dark periods in the irs history. there was a time when irs was awash with money and there was horse play and lavish parties.
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that was not good for anyone. at the same time, we found out the irs with singling out individuals on the groups of individuals and subjecting them to harassment and intimidation, bullying, if you will. that is what you inherited. also, probably inherited an agency that wouldn't do a good job of dealing with the consumer, the folks at call the irs if they have questions. when your predecessor was sitting in the chair you're sitting in, i asked him at a hearing like this, do you think the irs has the trust of the american people?
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he said, yes. but i want to try to help you build that trust. i'm sure that one of your goals as the new guy, as the new commissioner, is to rebuild the trust we have lost would not just this midi, but the american people. that is what you are about. i must tell you that some of the decisions you have made early on are of some concern to me as you try to rebuild that trust. for instance, $63 million of bonuses that were paid and reversing a decision that you predecessor made to not pay those bonuses is troublesome. i know that you do not begin this rulemaking process. there is a row that has been proposed that some would say -- rule that has been proposed that some would say -- now there is a rule for people to quiet people's involvement
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and they are proposing a rule that some would argue it is the same thing and fringes upon the first amendment right. you do not start the process, but you are continuing the process. one of the things i have read from time to time when you are on a whirlwind tour, what are your messages seems to be we do not have enough money to do the things that we need to do. one of the things i read about from time to time is the fact that you cannot answer all of the phone calls. i think it is 61% of phone calls are going to be answered. i have heard you say it we had
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more money, we could answer more phone calls. in jacksonville, my hometown, our paper said you had said we do not have enough money to answer more than 61% of the calls. you found that unacceptable or intolerable or outrageous or something. what i find unacceptable in the $11.3 billion appropriations that the irs received this year that you cannot find the money to answer more than half the phone calls and yet you can find the money to pay $63 million in bonuses. it seems to me that might be a slap in the face to the taxpayer. their consumer services as they try to find out more from the irs, they will find that is going down and that the bonuses are going up. i would think that is hard to tolerate as a taxpayer or as an individual. they would like better consumer service.
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it bothers me to see you do not have enough money to answer the phone calls, but you got the money and the time and the energy to pursue this rule. i read nearly 100,000 comments on this rule and that xl pipeline that is pretty controversial, maybe 7000 comments. this is a rule that is widely controversial. it has to be given the time, energy, and money, but you continue to pursue it, but there isn't enough money to answer the phones. i know we hear from time to time the argument is if you give the irs more money, they will collect more revenue. the argument is if you give the irs one dollar, you will get back four dollars or five dollars and maybe six dollars in revenue. if you do not give the irs money, the revenues will go
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down. it makes sense to say if you develop irs, it sounds like it -- if you give the irs money, sound like it makes sense. but there's no evidence that is true. often times, the opposite is true. the appropriations was increased with the irs and the collections went down. obviously there are other factors than just how much money the irs got. you got to look at inflation and population and tax policy. a lot of different fact race. last year in 2013, that was the best year ever. we collected $2.8 trillion. that was at a time when the sequester was going on. there is less money for the irs to have.
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all i have to say is i do not necessarily believe that a higher level of spending equals a higher level of service. that is why i think we have an oversight hearing to say how are you spending the money? it is not just how much you have, but how you spend it. i think how you spend it can improve even if you do not have as much as you would like to have. everybody knows government needs money to provide services, right? but everybody also knows that these are difficult times in our country. we have got 17 trillion dollars in debt. we have an annual deficit this year that will be less than $1 trillion and we are all excited about that. the first time in five years it has been less than $1 trillion. yes, government needs money, but i would say today the government need something more. in these discipline to rein in spending. it needs courage to make tough decisions.
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it needs commitment to make sure we do everything more efficiently and more effectively than we have done before. we want to work with you to help you do that, to help you set the right priorities which help you spend the money that we appropriate to you. we thank you for being here today. we will have questions. before we do that, i want to turn to my friend, the ranking member. let me say to him that it has been a whirlwind time, but he has been a great partner. we do not always agree on everything, but as we go through negotiations with our senate counterparts to come to this conclusion, it was a team effort. thank you for that. any comments? >> thank you for your willingness to work with us, especially your staff. and our staff.
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let's hope omnibus puts us back on the road of order. i would also like to welcome the new irs commissioner, john koshinen, for his first hearing before the subcommittee. thank you for undertaking this endeavor at a challenging time for the irs. by now, most americans know that last year it was recorded that the irs had used inappropriate criteria to decide what 501(c)(4) entities should be subject to greater scrutiny. as i said at the time, all members of congress were appalled by these actions.
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ineffective liberal and conservative groups alike -- it affected liberal and conservative groups alike. at a hearing soon after the controversy into light, the question i asked was where to go from here? what must be done to prevent something like this from happening again? i think that the irs has made a good start at answering those questions. the irs has implement it all of the recommendations suggested by the taxpayer. the irs has also implemented numerous internal reforms that have brought more accountability and oversight to review decisions that are being made. perhaps most importantly, the irs is making effort to further clarify what is and what is not political activity. there is no doubt a number of groups have abused their claims to the 501 tax-exempt status by engaging in political activity. this is not a right, but rather
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a responsibility. too many organizations have been claiming it as a way to avoid transparency and taxes. laster, i suggested the irs need to revisit these rules to provide greater clarity. as to what is considered a political activity for purposes of making a 501 designation, the rules proposed by the irs have attested to do just that in my opinion. i cannot say whether the irs struck the right balance, but i do know that they will take any and all concerns seriously though for finalizing them. however, this committee cannot help the irs and these reforms did we do not adequately fund agency. fiscal year 2014 appropriations gave the irs more than the sequester level, but the irs is still being funded at its lowest level since fiscal year 2008. if we care about the fair implementation of our tax laws, this is simply unacceptable. y'all know at this level of funding, every additional dollar even to the irs allows them to bring in at least six dollars from taxes. we cannot ask more from the irs
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and provide them with less. that is not a good recipe for tax compliance or the nation. i hope the hearing will be of use as we discussed funding levels. i am concerned we might be here to engage in election year politics. let me state the facts that are on the record already. it has been proven after significant investigation that the inappropriate targeting was both liberal and conservative groups alike not just one side. this targeting was not orchestrate by any political appointee or by an individual
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outside of the irs. the irs has been forthcoming in helping numerous investigations by using more than 150 employees to engage in 70,000 hours of work to provide the various investigations of more than 500,000 pages of documents. these are issues that simply do not need to be rehashed at this point again. rather this hearing must look forward to fiscal year 2015 appropriations process is upon us and the focus of the committee needs to be on ensuring that copper reforms are in place and that the irs has a resources to complete its mission of serving the american
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taxpayer. and ensuring that everyone follows the law. we know the importance the irs has in ensuring we have the funding. you have seen this controversy to cut further resources would harm the irs and the american people as well. welcome to the subcommittee. i hope that when we meet again in april, it will be under better circumstances. thank you. >> thank you. >> i would like to turn to the chairman of the full committee, mr. rogers. >> thank you. thank you, commissioner. this is the very first of what will probably be 100-120 committees our committee will conduct during the spring season. you are the very first one.
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you have the privilege and honor of sitting in that chair for the first time. before we get to the important business at hand of the day, let me first echo the chairman sentiment regarding the appropriate -- of reparations process. fiscal 2014 is a true result of compromise. my partnership with the ranking member and her counterpart on the senate side and ranking member shelby -- together, along with the subcommittee, we made responsible choices to reline our nations funding priorities and target precious tax dollars were they are needed the most, all the while continuing the trend of reducing federal discretionary spending. while the omnibus is a testament
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to the long-standing tradition of bipartisanship, now is not the time to rest on our laurels. as chairman crenshaw as mentioned, i expect the committee to move forward under regular order, draft legislation -- it is a product of rigorous oversight. we have much difficult work ahead of us. i am hopeful that the process will move swiftly and smoothly given that ryan-murray budget agreement. i think it is fitting that this commitment to regular order and transparency in the
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appropriations assess is reaffirmed at today's hearing with the irs. just as congress has a supreme responsibility and stewardship of the taxpayer dollars, so too does the irs have that special duty to apply our countries tax laws fairly and uniformly. commissioner koshinen, you have taken the helm of this agency during a tumultuous time to say the least. in the recent years, there have been grave violations of the public's trust that should give all americans cause for concern. i hope that you are the right person to write the ship -- right the ship. as i wrote to you earlier this month, i have serious concerns about the opposed regulation published by your predecessor in november. this rule would continue to target the first amendment rights of the same conservative grassroots organizations that were unfairly scrutinized in
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applying for tax exempt status in the run-up to that 2010 and 2012 elections. given the agency's recent track record of improper political isolation and intimidation, i strongly believe this rule is a step in the wrong direction for an agency struggling to regain the americans public faith and confidence. i look forward to hearing from you of your intentions in this respect today, particularly your plans to cooperate to make sure these dark days in the irs history books are truly behind us.
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acting commissioner wefel last came before the committee detailing the irs's wasteful spending on for most conferences and the senior executives who oversaw the 501(c)(4) debacle in cincinnati have received significant performance bonuses. listening to chairman crenshaw's remarks, it seems like déjà vu all over again. the irs discharge with the massive undertaking of a mandate under the affordable care act, the greatest intrusion of this agency into personal health care decisions in history, combating identity theft and refund fraud, and addressing international compliance issues. among many other competing priorities, you can understand why additional reviews and more training conferences with heightened security -- i can scrutiny, we hope to ascertain how the irs will go about planning is training conferences to ensure that they are goal oriented and effective, as well as compliant with the irs's
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procurement processes. i also hope you can explain to the satisfaction of this committee how and why $63 million in performance bonuses are appropriate or beneficial to the taxpayer? we are all painfully aware we are in the middle of some grim budget times. every federal agency, especially the irs is duty bound to root out excess and waste. when we provide you with more than $11 billion annually to fulfill these duties, we expect you to spend it wisely and effectively. mr. commissioner, i hope we have your commitment to work with this committee to achieve our shared vision of protecting the taxpayers and their hard-earned dollars. we look forward to hearing the testimony and wish you the best of luck. >> thank you. we will turn to the commissioner
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for his testimony. if you have any written remarks you would like to submit, you can keep your oral testimony in the neighborhood of five minutes. the floor is yours. >> turn on the microphone. >> all right. mr. chairman, ranking members, members of the subcommittee, thank you for the opportunity to be here before you today to give an overview of the irs operations. i'm honored to serve as the irs commissioner and serve the agency and the dedicated employees. i believe the success of the irs
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is vital to the country. i want to outline what i believe are the key challenges and what i will focus on moving forward. we just started a new filing season four weeks ago. over 30 99 returns have been filed. we sometimes -- many returns have been filed. many are being filed electronically. i'm confident that things do the hard work of our employees, the filing season will continue to go well. we also want to put to rest the issues of concern surrounding tax exempt status. the management problems associated with the 501(c)(4) application process has shaken the public's trust in the irs under the former acting commissioner. we have made great progress in this area. it is my duty to make sure we complete that work. public trust is the irs's most valuable asset. the irs needs to build on the progress it has made to improve
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tax compliance in a number of areas. one of the most critical is refund fraud. the irs has gotten better at resolving identity that cases. we are resolving those cases for taxpayers much faster. on average, it takes about 920 for new cases -- we can and will do better. the irs needs to keep looking for ways to improve the service we provide to taxpayers, which is critical to ensuring our system of voluntary compliance works properly. i am deeply concerned that chairman noted the significant reduction in the irs budget here our current funding level at 11.3 billion dollars is roughly $900 million below what it was four years ago.
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we now have about 10,000 fewer employees than four years ago, including fewer officers and agents. as a result, the irs estimates it will not be able to collected billions of dollars in enforcement revenues. we expect audits conducted by the irs will be time to buy an estimated 100000 and a number of collection activities will decline by 190,000. one of our concerns is to deliver the service for the taxpayer needs are this taxis and. almost 40% of taxpayers who called were unable to reach an irs employee. that is unacceptable. our employees are doing their best to answer every call they can. our service goal is 70%. full-year, we estimate 18 million taxpayer calls will not be able to reach us. another area of concern is the amount of time people wait to
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get in person help that our assistance -- to get a person. the best of a play efforts and an expansion of online offerings can only go so far to help with these problem's. there has been a loss of confidence within congress and this immediate regards to the way the irs has manages operations. one of my response abilities to make sure we solve management and operational problems that may arise so that congress and the subcommittee can be confident that our funding will always be used wisely and we understand the need to be careful stewards of taxpayer dollars entrusted to us. a look forward to working with congress and the subcommittee to solve the budget problems. i hope that one of my legacies at the end will put agency on a solid and funding level.
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this concludes my statement. i will be happy to take your questions. >> thank you. let me start the question process. in my opening statement, and mentioned the issue responding to the questions that people have. you mentioned that 40% of the calls went unanswered. as we have this oversight hearing, we talked about how you spend the money. i want to pursue how you make the decisions in terms of priorities. where do you decide to spend money and where do you decide you are not able to spend money when you have limited resources? the subcommittee oversees about 30 different agencies. your agency receives the largest amount of money. it receives more than half of all of the money that is allocated to distribute to
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agents. we have to make decisions in terms of priority and who is spending their money wisely and who is not. you obvious they have a lot of willie way -- leeway to make those decisions with the irs. he seems to me one of the most important things you do is deal with consumer services. you are like the front door. the phone call is the entryway to the irs. that is a lot of people's first contact when they make a phone call. if they find out the phone calls will be answered and if they do get answered, they will have to spend time waiting, that is not a good perception of the general public to have about the irs in this operations of business. i want you to tell this committee how you make that decision. here is what bothers me. any time you need more money,
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you pick out the most visible service that you offer and one that inflicts most pain on people and then you save, we cannot do that unless we have more money. it is like turning out the lights on the washington monument because we do not have enough money. when the sequester came, we cannot have tours of the white house because we do not have enough money. we will not let the veterans visit world work to memorial because we do not have money. i'm not suggesting you're using that trick, but sometimes i have to wonder when you have $11 billion and have to make these decisions, it seems to me that one of the priorities ought to be to interact with people. tell the subcommittee how you go about making that decision. i look back to 2004 -- 10 years -- 87% of the phone calls unanswered. i was a time when the irs had $1 billion less than it had today.
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i know you have more responsibility, but how you spend the money is just as important to how much you have to spend. tell us, if you will, if you ever thought about you got rent, technology, certain other things. in this case, billions of dollars to pay the bonuses and you are pursuing a rule that arguably clarifies things, but some would say it goes in the wrong direction. what goes through the decision-making process decide where the money gets spent? >> a good question. we spend a lot of time worrying about that question. we do some things that we have no choice about. we have a filing season. we spend a tremendous amount of time to make sure it went well this year. we have not had any major tax law changes.
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a simpler tax code, the better the filing season goes. we're also seeing statutory mandates. if you are told to do something, we will do it. we do not feel we have any choice about that. 75% of our budget is personnel. we have an thousand fewer people than we had four years ago doing significant more work, including a requirement that we implement those statutes. we have to make decisions. the only place we have discretion is in fact enforcement and in taxpayer services. had 3500 fewer people doing enforcement. 1500 fewer people answering the phones. we have made more cuts on the enforcement side than on the calls side. but they are two sides of the same coin.
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we depend upon voluntary compliance. i'm concerned if we cannot provide adequate taxpayer service, we will undercut the core mission of the agency. we have received 90% of our money is from the taxpayer. it comes from compliance. only two percent of revenues comes from enforcement efforts, but we need to protect the process as it goes forward. it is not just a question of a few dollars one way or the other. i would like to return to the days of when we had 80% phone calls answered. >> when you look at the rent and the contracts, if we could save money here and there, we could answer more phone calls. is that high up on your priority list? >> at the end of this year, we will be using less office space. we will be saving money with that. at the end of this year, we will
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have save $60 million by not producing all of the publications were used to and million out to everybody. essays a $60 million. we have cut contractors by over $200 million. we are continuing to look at ways we can do better with that. >> i appreciate that. i do think it ought to be a big priority and i hope it is. >> thank you. you have been on the job now at the irs just over two months. he spent 21 years in various public and private sector leadership positions. because of your previous experiences, i would be interested in hearing what your first impressions of the irs are. i understand you have been going on a listening to her. what have you been hearing from the employees?
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i would also like to know what the morale is of the employees. there are hits that have been taken. >> i went on a tour of the main offices. the people know best about what is going on in the organization are the people doing the work on the front lines. i'm listening to the employees of the town halls. i have lunch with 15 randomly selected employees to listen to what they have to say. i've had briefings with everybody running any department of any significance at the irs. i have been thoroughly impressed with the professionalism, the skill, the dedication of all of the employees. what surprised me a little when i started in cincinnati and talked with a chairman and jacksonville, eight cities, what
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surprised was the enthusiasm. they have not had a pay raise for four years and suffered through the shut down and endured the criticism over the last 8-10 months about the agency. you expect what i would hear is a lot of grumbling or complaining. what i have heard continually across those 10 cities i have been to is that their primary concern is that there is not enough people to help taxpayers. if people who sat in call centers, they are concerned not that they're overworked, but they are concerned that there is not as many people as are used to be answering phone calls. they do not feel they are delivering the service that people deserve. they often times are also concerned about the people standing in line. it is a refreshing indication of
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the dedication and the 90,000 employees working for the irs. the mission of the agency to provide taxpayers the services they deserve. >> in general, you feel that the feelings of the staff is one to get the job done. it is bad publicity house by some and a shortage of personnel. >> that has been my spirits and it has surprised me. i thought i would hear more grumbling that they wouldn't have a pay raise over the past four years. at last count, i have talked to over 3000 employees. the constant theme has been, we need more people to allow us to do the work. >> i think it is always a good time, so i will ticket time to say thank you to our federal
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workers. there is no small amount of members of both bodies, but that is another issue for another hearing. i had great respect for the federal workers and the work that they do. let me ask you a question. a former commissioner conducted an internal review. president obama requested to restore public trust in the irs. how the recommendations in that review been carried out? any other changes that might be helpful? if so, how can we assist you? >> we have implemented and responded to positively all of the nine recommendations from the inspector general. we are focused on the 501(c)(4) situation. we have also done broader reviews of efficiencies in the organization. we're trying to respond more effectively. >> how is my time?
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>> there's a yellow sign, which means caution. [laughter] >> i take umbrage whatever that means, that yellow. just one more question then. what was the effect of the sequester under operations based on that reduction? >> we expected the pre-sequester number. we would have been able to answer more calls and maybe do another 100,000 audits. we would collect approximately $3 billion more in our enforcement activities. >> all right. thank you. >> thank you, mr. chairman. good to have you here, sir. let me throw out two issues if i may. one, i have been dealing with to
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produce esters for quite a long time. unfortunately, the irs is not always acted in good faith. one time they admitted to me in a number of people that they had been instructed to mislead members of congress. i was pleased that they at least admitted to me that they were not authorized to tell me the truth. a sad day, but one i hope will never happen again. it pertains to an irs ruling that it is a technical advice that all of the outside experts said a law on -- this time, it is retroactive.
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if you want to change a law, proposed changes to make it respectable. that only did this group or entity that is effect did, but also many around the country. many have been halted as a result. there are still who have gone forward in paying higher interest rates because of the vagueness of this. i need your commitment that you will look at this in a serious way to make sure the irs is not doing things in a way or retroactively of changing 70 years of state law.
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>> i will be pleased to look into that and get back to you. >> i do expect to get together with you and saw that. >> i would be delighted to talk about that further. >> a real-time tax system. a pilot program associated with appropriations from congress. there is language in there. i sent a letter to commissioner miller then requesting that he confirmed in writing of the irs expenditures. the commissioner wrote back saying that the irs is not in the process of implementing that system. unfortunately, later i learned there had been money spent on that and that there had been
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plans underway. i try to find out how much it was. i asked the irs how much money had been spent on the tax system. the response was i think there was a contract for approximately three point $5 million -- $3.5 million dollars. they told us they would not do that. there has been documents recovered from the irs. they could have spent as much as $30 million. i cannot confirm that. are you aware of any further exploration or implementation by the irs of any data collection to to a real tax system -- real-time tech system? -- tax system? it seems to have been absolutely systematically wrong. would you pledge to adhere to
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that language and the current fy14 on the books -- what i am asking for is 100% transparency. >> i'm happy to commit that we will follow all of the instructions whether you give it to us personally or in the legislation. that is important to do. with regard to the real-time tech system, different systems have been called a real-time tax. what has been the focus is the idea of possibly populate a return form, get information in, look at it, and you can make decisions, or the irs can file the return for you. a lot of people talk about that as being the real-time tax. it would take a long time to do that. we do have something going on to figure out how to get that a third-party information into the system earlier so we can match up tax returns for identity
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theft. right now, we do not get the social security until late in the spring which does not do us any good. some call that a real-time tax system. it has nothing to do with the program you're talking about. we have no program going forward that i know of. you do not intend to do anything like that. thank you. >> thank you. >> thank you, mr. chairman. welcome. this is a historic filing period. the defense of marriage act was struck down last june. for the first time, same-sex couples will be filing federal tax returns together. this was the first filing period
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that is taking place. when education within the irs and outside is taking place? how are you helping to educate and make the resources available to people, especially with some of the perplexing these involve? different states have different laws. i have residence in my district and in my state who were married in iowa. illinois is beginning to recognize same-sex marriages. what is irs doing to deal with these complexities? >> one of the things that did surprise me is the amount of outreach the irs does as a general manner. we have a website which if you look at it today is a different website than it was a year ago. information about what information their clients will need. we have a youtube channel with over 100 instructional videos. we're looking forward to how to
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deal with affordable care act. they can advise taxpayers on whether there are circumstances change over the year. they can adjust whatever premium tax credit they are getting. we have been putting out reminders for people. we remind people when it is time to pay the estimated taxes. there is a tremendous amount of time spent reaching out to the taxpayers and educating them as much as we can. we do spend a significant amount of time doing just what you're talking about, which is prior to the filing season and during the filing season, gives people as much information as they can get. we are advising people to not call if you need to find out
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about where the refund is. go to the website. many people got information of where the refund is. you cannot than to get who you are and you can get the transcripts of your previous filings and you can print them out at home. you do not have to go out to and assistance center. how much of that could we give them in some other channel of communication? we have tweets. >> you recognize these are unique circumstances. the first time this is taking place and a lot of taxpayers need additional assistance. you're helping with these new filings. >> right. the taxpayers call and if they get through, they can get that kind of information. it is on the website.
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you can get all of these information before filling out the form. >> we appreciate that. your predecessor talked about the cases of identity theft. said there is -- obviously this is an alarming increase. what are you attribute in this too? what is agency doing? >> it has been an explosion since 2010 through the last filing season in terms of people either borrowing, stealing, getting social security numbers, and filing false returns and trying to get refunds early. we have spent time in jacksonville with the wonderful task force in state and local law enforcement have become more aggressive.
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last year we had 1500 investigations of from 300 -- last year we had 1500 investigations, up from 300. last year, we saw a towing in the number of returns that came through that we were able to tax. we think we are getting some of the people off the street. you're getting the message out this is not a free game. you can i simply still a social security number and get a refund without being prosecuted for that. it is a significant problem. we have in the budget proposed work that was not included in the budget, but we are figuring out other ways. it will be a problem.
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we think we have it under control. we are able to resolve the identity problems much faster and we used to. >> thank you. >> a lot of discussion about the 501(c)(4) earlier. what are some specific examples of the 501(c)(4)? >> 501(c)(4) covers a wide gamut from guarding clubs to advocacy groups. the vast majority of 501(c)(4) applications have nothing to do with political activity. it is relatively small. everyone is focused on the political organizations that are involved. maybe 90% of the 501(c)(4) of nothing to do with political
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advocates. >> can you give us a specific example of an organization that might come under scrutiny under this rule? >> any organization that is a social welfare organization providing information to the public that engages in political activity. if you're providing information about any particular subject matter, that would be social welfare. if you start running ads for a candidate in a campaign, that would be political activity or campaign activity. >> is it not true under the proposed definition that any public to mitigation that is made within time before an election would be considered candidate related political activity? >> right. there is a draft regulation. we have had many comments on it.
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it is asking for this discussion. there are three issues. one, what should be the definition of a political activity? what should be included as appropriate for a social welfare organization and what would be in that pool? >> is there not a proposed definition? >> is that the proposed definition right now? the one i just read that deals with political act to video -- activity. >> the comment that people are asking is what are the options to that? >> let's assume that definition stays in place. >> i would not assume that. we need to review the comments, which i will be involved with because it is a joint regulation
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from the treasury and the irs. my goal is whatever comes out of this, it should be regulation is clear, fair to everyone, and easy to administer. the irs is not a political organization here and we ought to do whatever we can. >> i heard to say that although it is a proposed definition right now, you hope that it is not the final definition. >> i hoped you would not put those words in my mouth. i hope that when the regulation comes out is there is one, it is clear, fair, and easy to administer. >> i thought i heard you say you hoped it was the final regulation. if it were final -- is that not accurate? >> if candidates are mentioned
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and it is within 30 or 60 days depending on what type of primary -- >> it would mean organizations such as planned parenthood or -- >> that is what the comments are about. there would be a public hearing after the comments are reviewed of which congressional members and the public would be invited to attend. >> does that mean -- let's say the american legion or the vfw, could they make phone calls to notify voters who want to register to vote or maybe a potential vote or to notify them about candidates and positions on military defense positions or expansion or defense in general? >> again, the proposed draft for comment would say that voter
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registration drives and in the context of a campaign would not be allowable. the other question that needs to be answered is a) what the definition should be and b) how much of that activity and an organization engaged in before it jeopardizes its tax exempt? to what extent should 501(c)(4) -- >> one last question. how many in the department have been terminated as a result of that -- >> there is a review board. leadership from the top down is gone. there are several people who are no longer at the irs. >> is there a number you can place on that? >> no. all i can tell you is there was
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a special review board. the review the leadership board all the way up through the leadership structure. the leadership structure has all been changed. >> all of the reprimands have been taking care of. >> i'm satisfied. the ig had good recommendations for training and better reviews. i made sure that people are comfortable. whatever issues were reported were solved. it is important going forward -- we had six investigations going on. i'm looking forward to having two of them finish sometime soon so we can see what the determination of the facts are.
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and will respond accordingly. i think people need to understand going forward anyone dealing with the irs should be comfortable they are going to get treated fairly in the same way anyone else is, whatever their organization is, whoever they voted for, whether they go to church or don't go to church. they are going to be treated the same way everyone else is. if you get a letter or a correspondence, you need to be confident that because there is something in your return that if it was in somebody else's return would get the same response. it has nothing to do with who you talked two weeks ago or what organization you belong to. pre-k's in your absence, we welcomed you, so we welcome you again in your presence. >> i hope my presence will be
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better than my absence, but the jury is out. >> i want to follow up. i looked at your statement. i am assuming you had help preparing it. this is your statement you stand by. >> i wouldn't have submitted it if i wasn't going to stand by it. >> you say the irs is going to continue to fulfill responsibilities. you reference the aca. i would like to focus on the genesis of the rewrite. do you know when it was first put on the books? let me tell you why i am asking this. we are talking about doing a review, so i am talking about how it did before.
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>> that has been around before. >> are you aware of major problems from eisenhower forward to what we are talking about now? >> i am not. >> i know you are not there. congratulations on your timing. it's excellent. >> some people would say it's not so good. >> can you tell us the genesis of how it was decided we need to take a look and do regulations. i get that you want to restore confidence in the irs, and good for you. there was no major tax legislation, so why is 501 c4 on top of the heap?
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>> it's on top of the heap week as there was the report noting there were difficulties in the determination process. one of those was that the treasury department and the irs should put on the priority form review of the requirements. >> so that was internally. >> there was the issue reported and that his strong recommendation was that a regulation be considered as part of the priority process of treasury, and that's not what happened. what happened before that i was not there, and i do not know. >> are you curious? >> i have spent 40 years -- 20 in the private sector.
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>> i don't want to cut you off. i will endeavor to play by the rules. i know you are not trying to evade. can you tell me what percentage of the budget is devoted to staffing operations. you talk about research ira d is. what percentage goes to 501 c 4 regulations? >> off the top of my head, only 80 work in the organization itself. >> it is one percent of the budget. >> it is one percent or less. it is one percent of the employees working the entire exempt organization, and 501 c4 are probably five percent of that, so you are talking .4%?
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>> the context is priorities. you have got the aca you are working on. you have issues of conferences and spending money. i will do the math on your budget. you have got bonuses in the news. you have 501 c4, and you have taxpayer assistance, which you have devoted time for. number one priority out of those is 501 c4? >> it's a priority because it has been an issue. >> is it the number one priority reform out of those? >> you're asking about regulatory reform. we are not reforming aca. we are just regulating. there is a set of regulations. if you are talking about my
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priorities, i would say if we could solve the final problem and put it behind us, that is one of the five or six priorities i have. >> i guess you see my question. where it is less than one percent and you are talking about our concerns of taxpayer service, our concerns about getting the filing right, the aca, which happens to be a small project, and you have management problems you have inherited. i appreciate that. it is like, really? a lot that has been around for 50 years, and this is what is going on? my time has expired. thank you. i will look forward to interacting in more than a five-minute context. >> i would love to sit down and have a longer discussion. >> inc. you. -- thank you. we are glad to have you come before us and talk about a variety of issues that are
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important to constituents at home and hard-working taxpayers interfaced with the irs. last year in the midst of the outcry over the nsa and the irs targeting of conservative groups based on ideology, there was a little-known breach of public trust occurring at the irs and other federal agencies that was brought to light that i think was as stunning or more stunning than other concerns raised in the media. that was the irs and other federal agencies admitted he were reading the e-mails and electronic correspondence of americans without a warrant, without respect for fourth amendment privacy protections, and the irs went so far as to say americans do not have reasonable expectation of privacy when it comes to e-mail correspondence. it's stunning. under your leadership, my question would be, is the irs continuing to read the e-mails
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or other correspondence of americans without a war and -- without a warrant, and when it was reading those e-mails, are you aware if it is reading conservative and liberal e-mails equally, or is it targeting those without warrants just on concerns as it was targeted by other portions of the irs? backs this is the first time i have heard the irs read anybody's e-mail. i will definitely look into that and get back to you with answers to your question. >> i appreciate that. would you agree to ensure it's no longer occurs in the irs? >> i would be happy to say if we have no authority to do it, we should not be doing it. criminal investigations doesn't investigate. we have 4100 recommendations for indictment. there is an enforcement arm of the irs that has an enforcement
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authority, works with the justice department and state or local governments. >> will the irs and other agencies argue they have legal authority under 1986 law that does not treat a electronic correspondence the same way it treats paper correspondence? this is outrageous to a lot of our constituents on both sides of the aisle. many groups across the country have spoken out about this. i have introduced the bill along with my colleague and democratic members that has 175 bipartisan cosponsors to ensure this practice stopped, so i guess in your leadership i would hope you could ensure you would head this off with a pass, that the irs would not be engaged in that practice, and that the americans could trust their correspondence is not being read by an irs agent without a warrant or following normal due process outlined in the constitution.
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>> i think it's a very serious matter. i will look into it and personally get back to you. >> the issue has been raised regarding 501 c4. it is an issue many americans are concerned about. i understand the irs is attempting to write regulations that might make the enforcement potentially easier on the irs. i think the biggest concern many of us have is most americans didn't have a lot of trust already, and now they have very little trust the irs is being fair in enforcement of the law. i have heard folks say they don't want to get involved in campaigns or be associated with a group because they're afraid they are going to be personally subject to audits. regardless of what rules we write at the irs, it's not the rules themselves. it's how they are enforced. it's whether we can trust the
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individuals to do the right egg. what can you do to ensure that folks, even if the rules are there, they enforce them fairly? that's the biggest concern for my constituents. not new rules, but that they are enforced. >> the public needs to have that confidence. one reason i am spending as much time talking to front-line employees is i am trying to make sure our culture encourages everybody to raise issues and concerns whenever they have them. danny set in motion the beginnings of a program of risk management, and i told people everybody has to be a risk manager in the agency, and an important risk is to make sure we are treating taxpayers fairly. we have a lot of rules, but it does depend on people, and my concern is to make sure any employee concerned and sees
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anything going on they feel does not reflect well on the irs, doesn't treat taxpayers fairly, a need to be careful -- confident they can raise that directly to me or to anybody else. >> we had commissioner shulman come before us and confirm before this became an issue -- he asked him, is this happening? would you allow this to happen? he assured us. we have had folks at in your chair and say, you can trust me, this isn't happening. >> i would say, my point earlier is when i get hair issue did in these things, my rule is to play the hand i am dealt, -- when i get parachuted into these things, my rule is to play the hand i am dealt. some things are not going to go perfectly. my view is if there is a problem, it's my problem, and we will work on it together. if there is a mistake, it's my mistake, and we will work on it together.
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if there's a problem i don't know about, that's my fault. we have not build a culture where mistakes can raise through the system. my view is i am accountable for everything the agency does. when we make a mistake we are going to find it, fix it quickly, and we will be transparent about it. if i don't know about it, that's my fault. i am trying to get it comfortable. every individual needs to feel bad news is good news. i cannot solve a problem unless i know it exists. >> i appreciate those statements, and i look forward to good result from your leadership. >> thank you. mr. butler is recognized. >> thank you, mr. chairman. thank you for being here. i have a couple questions. on the issue of social media,
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twitter and facebook, last year the irs noted it was in the process of updating its policies on the use of social media -- specifically, the irs is considering what limitation should be placed on the use of publicly available social media information in a civil examination or collection action. any new procedures would be made public. i was curious. two thoughts about that. how you decide who you are going to read up on if you are going to go that route? is it someone you are trying to collect information for a collection action, or is it that you are looking at putting together part of your division that is going to specifically troll online spaces? what is your thought process going in this route? >> our thought process is when we do examinations, when we send
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you a letter about something in your return, we deal with you about the return. we do not look at whatever your facebook account might look like. that doesn't seem to be efficient, effective, or appropriate. when we are in criminal investigations, the criminal investigation department will use all the information available when they are tracking down people. there i think it is appropriate to use whatever information they need to, but that's when they are tracking down people who have violated the law, not paid the taxes they owe, and one agent made a point to me, that we have to distinguish between the willing to pay who have difficulties and the unwilling to pay. the willing to pay that have difficulties have not paid, at that because they have some problem in their family. we have to deal with them. they are very different from the people who are unwilling to pay, hiding assets, storing them offshore. my view is we should chase them to the end of the earth and use social media.
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>> you're saying you exclusively use facebook and twitter for unwilling to pay criminal investigations? >> that is what i think is appropriate and important. >> you are not using facebook and twitter for people who are not in criminal investigations? >> i do not know. i will find out the answer. it's an important question. i would be delighted to share with you that answer. >> please share with the committee. >> i would be delighted to share with the chairman and everyone. >> i got a letter from a constituent who lives abroad and has serious concerns about the foreign account tax complaint act. his observation was that a large number of americans who are voluntarily compliant with this, with our tax code, and this law is detrimentally impacting those folks. you are wanting to go after people who are not, but what he
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was saying, and what he is seeing if his bank account has been closed. he has other accounts. specifically, his bank cited this law as the reason. he is concerned about other accounts he has, yet he is trying to be compliant, is being compliant, and basically his comment is, i am being punished are having american citizenship -- i having american citizenship. i am following the spirit of the law, yet i am losing services because they are citing this law. what are you doing about -- you talked a little bit about going after criminal investigations. what are you doing to make this easier on law-abiding citizens who are trying to comply? we don't want them to have to disavow their american citizenship? >> one thing we are starting to look at as we get information is
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to make sure we impose as little burden as we can on people you have been talking about. the problem he is running into is in from the i rs or the united states. the problem he is some banks in some countries are saying, rather than determining who is native and who is a foreign-born are disciplined, we are sadly going to only deal with resident citizens, and they are saying, if you're not a resident citizen, we are not going to provide you services. that's not a widespread opportunity because banks are dealing with citizens wherever they are coming from. we are not the only country engaged in this effort. it is unfortunate were a bank decides they are only going to deal with their own citizens. you would think it would be foolish because they are missing off -- missing out on people like your correspondent. whatever we can do for people who have already been compliant
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to try to make sure we do not impose unnecessary burdens and we rewrite it to the extent we can, we will. >> really quickly, if someone has a challenge, whether it is a person overseas or whether it is the small businessman i sat next to on my flight over here, who did tell me he feels like he has received retribution for speaking out clinically in the form of a beautiful audit -- if someone has that concern or they feel they have been unfairly targeted, who did they address their grievances to? is there a third independent group? >> they can feel free to contact me personally. the taxpayer advocate has been set up independently. you will hear from her later. the inspector general does a good job of pursuing specific complaints. my view is those are important sources of information.
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i shared the interagency council for three years, and i think inspector general's provide a valuable service and a lot of information. they do not create the problem. they just discover it before it gets more complicated. i would think anytime they feel that way they should feel comfortable contacting the taxpayer advocates, because i do think -- going back to this issue -- we are going to do 1,000,004 hundred thousand audits. some are going to be republicans. some are going to be democrats. some are going to be people who never go to church. some are going to be people who go to church regularly. what is important is for those people to understand they are not getting the letter from the irs because of who they voted for, where they were last weekend. they are getting that letter because there is something in the return we are asking information about. >> to that point -- you are
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going to have to prove it to us. they have received the letter because of political ideology before. that is part of what this is about. we look forward to that. >> it's intolerable to have it actually happened. i think it's extremely corrosive for people to think it might happen. they have to understand that my highest priority is to do whatever i can to restore whatever trust has been lost by the american public and the irs. we should be viewed as we want people to pay the right amount -- not more and not less. we are going to deal with you fairly and the same way we would deal with anyone else. >> thank you very much. we have got some time for another round of questions if members have them. let me start by asking two questions. one has to do with the 51 c4. there has been a lot of discussion. my main concern is it seemed to
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be premature in the sense that all these investigations were going on and we didn't have all the information, and i think this subcommittee will recall we put a provision in our markup that said we wouldn't spend any money that was appropriated under this bill to work on that rule. that was about to go before the full committee, and it didn't make it, but there was concern when we have limited resources that may be that is something we can wait until we have all the information, but that didn't happen. i assume you don't plan on stopping that anytime soon. let me ask you, when you anticipate finalizing the draft regulation, are you going to finance it before the november elections? >> i think the chances of again finalized before the november elections are pretty slim.
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there will be a public hearing. there will be opportunities for people to provide information to us. if there is going to be a regulation, and it has changes in it, it would likely be republished for more comments. my hope would be at least some of the investigations would be done well before we get to any finality in whatever regulation might come out, because i think it's right. we need to know what the facts were in that particular circumstance, although the general issue is how do we provide clarity not just for the irs. my concern is if i were organizing and advocacy operation, i would appreciate if i had clear guidelines but most importantly if i had clear guidelines for how to operate it. the more clearly we can provide as to what you can do and what
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you cannot do or how much you can do without being in jeopardy it seems to me is very important. the facts and circumstances and unclarity about how much political activity you can do means everybody is sitting out there worrying about how does it get measured. is this going to count on one side of the equation or the other side? i just don't think it is helpful for us, but it certainly isn't helpful for people running the organizations. >> it's good that you don't big it will be finalized before the election. i guess it could be if there is a speed up process, but an equally important question is do you think these draft regulations -- have they already produced a chilling effect as people decide, maybe we ought to avoid political activities because we don't want to jeopardize our tax-exempt status or have it revoked? might that happen?
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>> i don't know. i haven't seen any studies or surveys about that. we have tried to emphasize we have revised and taken all the recommendations into consideration. we are providing appropriate training and oversight for the process. we are encouraging people to continue to file applications. in fact, we have a streamlined process set up to solve the backlog, which says you are not going to spend more than 40% of your time on what has been historically viewed as political activity. you can get a streamlined for the approval so you won't even have to worry about the backlog. >> last question. you answered this a little bit. whether there will be -- whether you will wrap up all these loose ends and be one final regulation, or maybe it might be a series of regulations adopted over the last couple years. do you have any judgment?
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>> i am trying to keep an open mind about it. there is a complicated question of what should the definition be applied to. i think those are important questions you can't know an easy answer to. my instinct is the clearer it is and the more simpler and administrative all -- administrativable it is the more happy we will all be. >> i found out the first time this last week there is a program called free file the irs has in conjunction with a lot of folks that prepare tax services thomas -- tax services, and we had an event in my district to try to make more people aware of it, it is i am not sure people are aware, but if you make less than $58,000 a year you qualify for free file, and you can file your tax return or free because
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of some arrangement the irs has with this alliance of folks. they told me they have to renew that every five years with the memorandum of understanding, so in an effort to make more people aware, they said 75% of taxpayers may be eligible for this. tell us quickly if you think that is a good idea and if you plan on signing a new memorandum of agreement to extend it for another five years. >> that's a good idea. i should take you with me because every time i do a filing season discussion, i try to emphasize we have disagreement with 14 providers. you can go on the free file website. 100 million americans are eligible. you can take and file for free. you don't have to pay anything. you get the same treatment you would if you were in one of their offices.
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it's a wonderful partnership. we are trying to renew it. i think taxpayers comfortable with doing their returns without a provider should take advantage of this. it's one of the services we are here to provide. >> you are her, and you are here to help us. >> i want to use a little more time to say i totally agree. i know that is shocking to some folks. i sponsored his bill, cosponsored his bill. as ranking member i participated in his amendment because whether democrat or republican, i don't believe our privacy should be lost, so when you hear about
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government perhaps reading e-mails, that's unacceptable. unacceptable to us and unacceptable to democracy. i am beginning to hear some people say, if you have nothing to hide. it has nothing to do with having anything to hide. it has to do with the constitution and what this country is known for in the fact that so many people throughout the world would like to imitate who we are or who we think we are, and i know who we are, and we shouldn't have that. that doesn't mean i sign up with those who do not believe in the federal government or would like to disable government agencies to the point where they cannot function, but on this we agree americans have a right to privacy, and that should be something we protect. i think the big headlines tomorrow in one of the papers will be that we agree on something, and that's a good sign. >> i am happy to be the catalyst
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on that. >> i have no idea if they are near the bronx or anything like that. let me get this straight. if you fought -- if you have 50 one c4 status, you're not supposed to engage primarily in activities that are political. if your activities i primarily political, my understanding is you can register as tax-exempt under another part of the tax code. the problem for some organizations is that if they do this they will have to disclose who the donors are as opposed to being registered under 501 c4, where you don't have to disclose who funds you, even though these groups could be registered, they don't want to do so because they would have to disclose their donors. am i correct in that? >> that's correct. >> not putting you in a spot where you have to try to figure out what happened in the past. was that part of the problem
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that people were doing this and therefore there had to be some scrutiny, and maybe the scrutiny went overboard? >> i have not spent a lot of time working backwards because we have six investigations going on. there was an increase after 2010 were organizations put money in public discussion debate, so the volume went up and became more visible. for a long time no one paid much attention because most of these organizations were not particularly going forward. if the process is clear, people who meet the process ought to be able to make that choice. i understand if you were a 527 you could send all your time and money on political activity, but contributions would be visible. if you are a 501 c4 social welfare organization, you can only spend a certain percentage of your time, and nobody quite knows how much.
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>> do you think, or maybe i missed something. do your rules defined once and for all what is political activity that you think we will reach a day where we can define what is political activity? >> that's the purpose of the draft. that's the purpose of the comments about what should be the definition and how much of that activity should you be allowed to do before you jeopardize your status as a social welfare organization? it's not a simple set of questions. it's a complicated issue to figure out how to deal with that in a way that is fair to everybody. i think the criticism needs to
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be considered in the comments, and we ought to make sure this applies fairly to people and is not viewed as singling out a particular group of people, which is why you also have to take a look at which sections of the statute it will apply to. those are important questions. my goal would be, if it is clear and easy to administer, it will be better for the irs, and it will ultimately be better for the groups that meet the standards and are operating. he ought not to have to be continually figuring out what is this really mean. that's my concern about facts and circumstances. they always have you in a position of figuring out what are the facts and circumstances, and it just seems to me that is not good for them. it gets us involved in a lot of decisions i think we would be better off not making. >> one quick question. i supported $200,000 in the appropriations know for training of employees. please ask blaine how you will
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use these funds to prevent the types of problems previously from happening in the future. >> training is important. there is a concern that we train appropriately. the training session that went on was in 2010. omb has made it clear those sessions are not going to happen and they have to be approved at a high level. in the particular case, in response to the recommendations, we provide clearer guidance to employees. he provide more training. one of the recommendations was to provide training before any election, so we will make sure people understand what is appropriate and what is not appropriate in terms of reviewing these as we go forward. we are comfortable that while the standard is still facts and circumstances, we are comfortable that we have much better training and much better visibility and oversight on this issue. nobody paid a lot of attention to it, which i think is part of
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the problem. >> i know you have a very difficult job. if it makes you feel any better, understand that all the years i have been in public office, i have always known the irs was never very popular to begin with. that is right up there for some folks. yes, you have a challenge to bring back the confidence the president wants, but this is not new. there has been a distressed -- a distrust for many years by the public, and that's something we have to keep working on, so thank you for your service. >> thank you. >> thank you for your answers. i appreciate that. a couple of things. one is when we talk about transparency and all that other
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sort of stuff, and he plans to release the e-mails to any of the other committees in the near future? let me tell you why i am asking that. the context of the proposed regulations, the context that it comes forward in is something i don't think anyone in this room can ignore. you know 50 years may not be very important, but on the heels of what has happened in 501 c4, if that hadn't come to light, they wouldn't have taken a look at it. when you say going forward we want to be transparent, but when you say, as part of that we are going to define political activity, and god bless you for your courage -- it sounds like defining obscenity, and the supreme court had a hard time doing that. i wish you success, but the
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timing of this, and we are going to define political activity, that is something the legislative branch ought to undertake if it needs to be done, because the regulation will have the effect of subsuming whatever the 50-year-old law is when you define activity, and you are trying to say i agree or i disagree. if that needs to be done, we ought to have this debate. one of those e-mails going to a meaner committee than this one. >> i would just correct a slight technicality. what has been in place is the regulation. there is an irs regulation that sets in motion what we have today. the law has been in effect longer than that, but you are right. if we end up with regulation,
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congress has authority to change the statute or overrule the regulation. it's not as if the irs or administration has carte blanche to do whatever they want. with regards to the regulations, we are anxious to provide a list of things for the items they needed to have -- were very anxious to get all the information he needs to make his decisions. we are working with the committees. we are working with the senate finance committee as well. we have for congressional ones going forward. we want to satisfy them that we have the information they need about the process. >> let me tell you why it's important. it's not important in who did what to whom or who shot the sheriff. it's important in the thing at this regulatory action and going, was this a flaw, or was this out of the ordinary? to listen to this, yes, we are changing the regulation. it's not you, but it's general.
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i think it's important and examining how the existing regulatory body was working before this came up, not in terms of who got caught. with that, i look forward to visiting with you, and i yield back. >> let me say couple of things to make sure we have clarity. the regulation was drafted pursuant to the report. the report to my understanding had been underway when the irs acknowledged it in fact had been inappropriately highlighting organizations for review of the 503 c4 area. the investigation had been going on for some months, and the draft of the regulation was a recommendation, but it's right. we need to provide as much transparency as we can. my goal is to do whatever we can to get all the investigators the information they need for the
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determination process. when you start a new investigation, that is different from what we have been dealing with for the last eight to 10 months. we are happy to try to get you information, but we can't do a series of investigations at the same time. >> it would be nice to have a rule to say you cannot pick out people based on political philosophy and intimidate them and harass them. that would be a pretty clear rule. >> i think that's the rule. >> i guess that got violated. >> i think there are investigations to find out whether they were and how. >> thank you, mr. chairman. i would be happy to yield to mr. serrano to say anything nice about me.
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if you ran out of time i would be happy to provide additional time. i want to thank my friend mr. serrano for his comments. as you can see we have strong bipartisan support. i know we have your assurances we are going to try to fix that. there are a lot of issues i think we agree on in this committee that don't always get media headlines. it's nice to find more of those we can work together on. it's nice to find folks on both sides of the aisle working on that and issues. i want to give another one we have bipartisan agreement on. this comes from a constituent as i asked what questions should i ask he irs commissioner, and i think this is a very important question and probably felt by a lot of americans. we talked about the trust deficit that exists between the internal revenue service and americans, particularly in light of what i will term as much more egregious than maybe we heard from my colleagues on the other
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side of the aisle, then the abuse of the code to attack people based on ideology. we are going to continue to investigate not only your investigation internally but here within congress serious investigations, and people need to be held accountable more than they have been. that being said, john, a cpa in my district, makes a point that the tax code is difficult to navigate. i think we would agree on that. 4 million words. 10,000 pages. how can the irs make it easier for qualified preparers and regular taxpayers to efficiently manage their taxes and provide quality service without the threat of onerous penalties for unintentional oversights or misinterpretations or unintentional errors? how can there be less of an adversarial relationship between the professionals in the irs when dealing with taxpayers as
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well? it is not just a function of money. how can you operate the irs in a different way to improve that relationship, which you can imagine for a hard-working american who has to pay taxes, it's a nightmare trying to figure out how to sort through all this. many of us believe we need tax reform. i would like your comments on that. >> as i told the chairman earlier, i strongly believe tax reform to make it easier for people to figure out how much they owe. most americans if you tell them what they owe are happy to pay it. not overly happy but willing to pay it. when you impose complexity and
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make it difficult they get less happy. we have an important partnership with preparers. we are always concerned about unregulated preparers on the periphery who sometimes engage in fraud, sometimes are uneducated and don't provide good service. we have a lot of programs trying to reach out to preparers to provide as much information as we can. i would hope as we make the website more user-friendly, it used to be clunky, and we are spending several resources there because we think it's important for taxpayer service. we value the work they are doing. they are our outreach. if we can have them comfortable they understand the intricacies of the tax code, it will make it easier for the client. we have a special tax prepare a line they can call. one concern is even their resource constraints have made people lag. i don't think that's fair to them. they have businesses to run. if they have to wait to get on the special line, if they have five or six clients they could waste a significant amount of time. all i can say is we value the preparer community.
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we will continue to reach out to them. the best thing we can do is try to provide as much guidance as we can, and we will keep doing it. >> it's also a function of style. they take their cues from the person leading the organization, so efforts you can make to ensure the relationships are less adversarial and more supportive -- i think we see this at all levels of the government where americans feel the federal agencies are not there to work with them but rather to work against them, and this is a common problem in every agency, and i hope you will do your best to try to fix those problems at the irs. >> one advantage of this tour i am on is i get to talk to people doing the work. in philadelphia i had a productive meeting with half a dozen revenue agents or officers, and that is where i got the willing to pay, unwilling to pay distinction. they are saying, we need to make sure if you are willing to pay and just have difficulties that we work with you. we don't actually make you feel
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uncomfortable. their concern is a lot of times people don't respond to notices from the irs because they are nervous about it and concern. their point is we ought to have a way of making sure people understand if you are just having trouble paying your taxes, we are going to work with you. the people we don't like who are -- are the people consciously avoiding paying taxes, people engaged in fraud. those people we don't have to be very nice to. i think the point is well taken. if there is an honest mistake and people didn't and things just didn't understand things we ought to have a working relationship with them. >> one more budgetary question. he asked this question earlier in a different way, but i would like to know and follow up with information from the committee -- how many hours and how many dollars have been spent relating to the controversy created by the investigation relating to
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501 c4 groups last year and the changes you are looking at now? i know you said it was less than one percent of your budget. if you can let us know the impact. these things do have an impact on time that could be spent elsewhere. number two, how much money has been spent, and how much are you needing and requesting relating to the enforcement of the affordable care act? i know that was several years ago. they ask for hundreds of millions of more dollars to go out and make sure small businesses and americans are following mandates regarding this law, and i would like to know the cost to the irs and where you're finding these resources. >> that's a question i have been asking. the 2014 presidential budget for the irs proposed 440 million dollars for the affordable care act. $300 million was for information
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technology. none of that was provided, so we have to pay out of other ip projects. the hundred million is primarily for dealing with information issues, designing of systems, making sure they work. one reason it is my priority is i am committed we will this time next year have an effective filing. we did that at the front and. it is a major challenge. we are finding other areas. >> the amount requested was for 40. how much does the irs spend annually on implementation of the affordable care act? how much does it project to spend? >> i can get that with what we are spending. one of the issues that is going to happen to us i have talked to people about is starting late in the fall but certainly next year, because it is a new requirement, we are going to have a lot of inquiries from